Illinois Districts Swarm Bond Market To Blunt the Impact of New

School districts and other local-government agencies in suburban
Chicago are speeding up bond issues in an attempt to head off a new tax
law that educators predict will force significant program cutbacks in
the years ahead.

The Illinois legislature passed the measure this year in an effort
to provide tax relief for suburban residents. Under the statute, which
takes effect Oct. 1, local property tax-rate increases in five counties
surrounding Chicago will be limited to no more than 5 percent a year.
Bigger increases will have to be referred to voters, who have been
unreceptive to tax-increase proposals in recent years.

The provision does not apply to Cook County, where lawmakers instead
imposed a one-year freeze on rate hikes.

Local taxing districts that maintain services ranging from forest
preserves to sanitation systems-and, to a somewhat lesser extent,
school districts--have swarmed the bend market in recent months in an
effort to raise bond revenue, and to establish the new tax levels
necessary to pay for the bonds, before the Oct. 1 deadline.

The bend rush has caught state officials and tax-limitation
proponents off guard, and some analysts say the proposals threaten the
intent of the tax-cap law.

"It is unfortunate because it flies in the face of the law and what
it was supposed to accomplish," said Kevin Johnson, a spokesman for the
state revenue department.

Seeking an Answer

Because many of the suburban Chicago districts rely heavily on
property-tax revenues to fund their budgets, rising bend debt generally
translates into higher property-tax rates. For many districts, next
year's tax cap will also mean a ceiling on the size of bend issues
districts can initiate without going to the voters.

School officials who have been turned back in recent tax referendums
said the rate-limitation law left many districts potentially in the
position of being able to obtain new funds to accommodate growth,
academic programs, and administrative costs only by making cuts in
existing programs.

'I realize we need to have some tax reform," she said. But the law
will make cuts inevitable, she warned, with enrichment programs for
special-education students and at-risk children among the first to
go.

"Anything that is not mandated will be cut," Ms. Yastrow predicted.
"I don't see any other answer. It is next to impossible to pass
referendums."

Many districts that have hastened their bond issues did so in
response to the legislature's decision not to exclude mandated "life
safety" building-renovation projects or contributions to tort-immunity
funds from the tax-increase ceiling, according to Pete Weber, director
of government relations for the Illinois Association of School
Boards.

Mr. Weber said the impact of the tax-limitation measure will be
compounded in the suburban counties by the state's decision to delay
one monthly general-school-aid payment this year.

Stockpiling Cash

Officials in School District Unit 46 in Elgin moved a $7-million
bond sale scheduled for next spring to late this month. In addition,
they added $5 million to the bond issue in order to stockpile cash to
preserve existing programs.

"While there may be some cuts for the 1992-93 school year, we feel
that the $5 million will ensure that they won't be drastic or major,"
said Gordon Schulz, the district's assistant superintendent for
finance.

The reserve funds, he said, will be necessary to serve the
district's growth. Elgin officials opened four building additions last
year and plan four more later this year. Two new schools are scheduled
to open next year.

The Elgin district will use $4 million of its bond proceeds for
life-safety building work, ranging from roof replacements to asbestos
removal. Another $3 million will fund a cash-management program that
allows the district to pay its bills until local tax revenue is
collected later in the school year.

Ms. Yastrow said the tax-cap issue has underscored longstanding
doubts about the level of education local taxpayers are willing to
support.

"I'm with people every day who are not in education that say we need
property-tax relief and at the same time need the same government
services," she said. "I don't think they believe the programs will
truly be cut."

"I think there's no question about it now in terms of the schools,"
Ms. Yastrow observed. "I'm not saying that the world is going to fall
apart, but we're going to have to look at different kinds of
services."

Vol. 11, Issue 01, Page 33

Published in Print: September 4, 1991, as Illinois Districts Swarm Bond Market To Blunt the Impact of New

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